Broadcom has raised its bid for Qualcomm to about US$121bn, in an attempt to force what could be the largest-ever technology deal.
The new offer of $82 a Qualcomm share will be Broadcom’s final offer, according to a statement on Monday. The deal would take the form of $60 in cash and the remainder in Broadcom shares.
Qualcomm’s board previously rejected Broadcom’s original $105bn acquisition, and has since dug in against the threat of a takeover, with CEO Steve Mollenkopf dismissing the bid as not being worth consideration.
Broadcom CEO Hock Tan is now putting pressure back on Mollenkopf and his board, who have so far refused to negotiate. By sweetening the offer, he’s also improving prospects for his nominations to Qualcomm’s board in a shareholder vote next month. A victory in that effort would void the current opposition.
Current Qualcomm board memeber Paul Jacobs, alongside one other, have been invited to join the new board, Broadcom said in its new offer.
The offer also hinges on Qualcomm’s ongoing $47bn purchase of NXP Semiconductors. Broadcom said the deal is either agreed at the current price or terminated. NXP shareholders have piled into the stock, arguing Qualcomm’s $110/share offer must be improved.
Qualcomm didn’t immediately respond to a request for comment.
Broadcom’s hostile bid for the larger San Diego-based company is the latest and most audacious move by Tan in a string of deals that have made his company one of the world’s largest suppliers of semiconductors. He wants Qualcomm for its leading smartphone modem chip division, an example of what he calls a “franchise” that will continue to dominate.
On the cusp
Qualcomm has countered that its future is much brighter as a standalone company. The chip maker says it’s on the cusp of breaking into new markets for products such as servers, PCs and cars, putting it on a path to becoming a much bigger company.
That argument has been hurt by attacks on its licensing business. Regulators around the world are fining or investigating Qualcomm, supporting elements of Apple’s claims in a lawsuit against the company that it abuses its dominant position. Qualcomm has countered that it expects to win in court over time.
The fate of Qualcomm’s licensing business is key to its future. The company is unique in the chip industry because most of its profit comes from charging fees on patents that cover the fundamentals of all modern phone systems. That cash influx fuels industry leading research and design that in turn helps its chip unit build products that dominate the smartphone industry.
Investors will have to choose whether they want to take the money from Broadcom now or sit tight and hope for a favourable resolution of its legal entanglements and for the promised new market growth to kick in.
Before reports of Broadcom’s $70/share offer in November, Qualcomm’s stock had been trading at less than $55, partly because of worries its earnings would continue to be hurt by customers such as Apple refusing to pay. Investors contacted by Bloomberg at the time of the initial bid said they would need more than $80/share to be persuaded to side with Broadcom. — Reported by Ian King, with assistance from Alex Barinka, (c) 2018 Bloomberg LP